Launching your business is a difficult task. There’s an entire business model to set, so many executive decisions to make, and 90% of the time, you’re not sure you’re making the right decision. If it’s a startup we’re talking about, the task is even more difficult because you’re planning for a fast launch (a.k.a. a tighter planning schedule) and quick growth. One of the first major challenges when launching a startup is handling insurance. Just the essential (initial) policies can be numerous and quite confusing. So, to help out new entrepreneurs, here are the basics of what you need to know about insurance policies for startups. 1. General Liability Insurance If you want to handle most of your liabilities with single insurance, general liability insurance is the closest that you can come to it (in a way). In general, this type of policy should cover things like: Bodily injury Property damage Advertising injury Products and completed operations liability Legal defense costs Your general liability insurance is the catch-all of insurance. It covers many different scenarios, but also has some serious limits and exclusions. The bottom line is that you should start by getting general liability insurance, then proceed to get specialized insurance for every field your business engages in. Some of these exclusions are: General aggregate limit - There’s a maximum amount that the insurer will pay for all covered claims. Occurrence limit - There’s a limited number of times that an insurer will pay for a covered incident. In other words, while you have some protection, it’s not nearly as absolute (or sufficient) as you think. This is why, aside from general liability insurance (that you should get either way), you also need specialist insurance. We’ll list a few of these in subsequent sections. 2. Property Insurance Startups usually take a quicker path toward business-building, meaning their development model is high-risk and high-reward. They take extra risks to expand as quickly as possible, so every threat represents a bigger problem. A property insurance policy is one of the most reliable ways to protect assets. Regardless of how well-planned your expansion plan is, you can’t plan for a natural disaster, theft, fire, or a random act of vandalism. Still, what would happen if you didn’t have an appropriate response? With a property insurance policy, you would get the funds to mitigate the damage and return to work. Sometimes, it’s not just the damage that’s the issue. Say you need to renovate your business, and the process will take a month. What will you do within this month? Endure the downtime? There are not a lot of startups that can take this hit. Property insurance can provide you with the assets to rent a temporary workplace or equipment to ensure business continuity. One of the hidden perks of getting property insurance is a regular asset valuation. This gives you a better idea of your total worth. 3. Fleet and Commercial Trailer Insurance If your startup has a fleet, protecting the vehicles, trailers, and cargo they carry is essential to your enterprise’s survival. Somewhat similar to property insurance, even if you hire the most careful drivers, you still can’t account for random acts of vandalism or accidents that are someone else’s fault. The thing is, just protecting your vehicles is not enough. You also need commercial trailer insurance. The physical damage on the trailer can be quite expensive, but you also need liability coverage (Ex: in scenarios where the trailer operator damages someone else’s property). Most importantly, it’s not just about the trailer but also the cargo. So, check if your policy provides cargo coverage. The most important point to address is that it doesn’t matter if you own the vehicle or not. You also want to get non-owned vehicle coverage. Sure, the party you’re renting from can have insurance coverage, but you should never assume this. Instead, check it before it’s too late. This may even be a compliance requirement, depending on the state or region. While this is worth checking out, the safer route is to get it and be done with it, since you need it anyway. 4. Professional Liability Insurance Everyone makes mistakes, startups more than other enterprises. It’s tough to handle your workload when you start quickly and expand rapidly. As a startup, even if you launch by the books, you’ll often overextend, usually accepting more work than you can handle now. This leads to mistakes, and it’s why you need professional liability (errors and omissions) insurance. In a case where you do make a mistake, this will provide you with protection against claims and third-party allegations, provide coverage for errors and negligence, and cover your legal defense costs. In other words, it will give you the means to fix this problem, at least partially. In most industries, professional liability insurance is mandatory in order to stay industry compliant. Due to the nature of your services, professional liability insurance premiums may be particularly high. However, this only happens in scenarios where you’ll likely need it. This is an extra reason for you to get it. Just make sure to understand that there are coverage limits. Also, reputational damage is a whole different thing, so don’t just assume that you no longer have to try or pay attention to details. This is not what professional liability insurance is for. 5. Workers Compensation Insurance If your employee suffers an injury in the line of duty or develops a work-related illness, they’re due workers’ compensation. With worker’s compensation insurance, providing this is a lot easier. Workers’ compensation insurance is supposed to cover medical expenses and rehabilitation and provide the worker in question with a wage replacement income. Keep in mind that not every injury is fatal or permanent. With the right insurance policy, you may be able to craft a return-to-work program, ensuring full recovery and a much quicker return to the line of duty. A replacement is never your first choice, so you want your starting roster back to full strength as soon as possible. As a startup, you’ll already rely on your staff so much that every specialist will be able to make or break your business. This also has a strong psychological effect on your staff. First of all, to a job applicant who does their homework and does some research, this will be a huge plus. Coincidentally, these people are worth hiring (and keeping) the most. Also, the fact that there’s this extra line of protection will put your team’s mind at ease and improve your employee retention and satisfaction. 6. Business Interruption Insurance When it comes to your work, there are so many occurrences that can prevent you from working. You could fall sick, have an accident, or have a family emergency. Well, these emergencies and unexpected situations are not exclusive to businesses. However, they tend to suffer much harsher consequences when they do. The best way to protect against this is with business interruption insurance. This policy should provide income replacement or at least, cover fixed expenses. Sometimes, as we’ve already mentioned, the downtime is caused by problems regarding your premises. So, business interruption insurance is supposed to cover the relocation costs.Lastly, and probably most importantly, this policy should help you with customer retention. You don’t want people to leave you permanently because you’re unavailable (this is your worst-case scenario). Business interruption insurance can help you with that. 7. Cyber Liability Insurance Let’s face it, while a startup can exist in any industry, most of them are (at least in some form or format) in the technology sector. This is why cyber liability insurance is such a high priority. Both data breach response and data restoration take resources, which is why cyber liability insurance can be invaluable. If the data of your customers is compromised due to your negligence, they may decide to sue. In this situation, you want insurance covering your legal expenses. Finally, malicious cyber activity can cause business interruption. We’ve discussed this at length in the previous section. With the Right Set of Insurance Policies, You’ll Cover All the Bases As you can see, while some of these policies overlap, serious coverage limits usually exist. For instance, while cyber liability insurance covers business interruption, it doesn’t do it nearly as well as actual business interruption insurance. The same goes for general liability insurance and damage on the fleet and trailers (nowhere near specialized fleet and trailer insurance). The key thing you need to do is assess how much coverage you need in each field and make your insurance policy plan accordingly.